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The economic impact of the COVID-19 in Guinea Bissau will be devastating

More than 80% of the Guinean population depends directly or indirectly on the marketing campaign for cashew nuts, which also represents a contribution of 11% to state revenue and 90% of the country’s total exports. The coronavirus pandemic deeply affected the cashew nut marketing campaign and the negative effects on the country’s economy will be soon visible.

Michael Jermaine Cards

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Guinea-Bissau’s Finance Minister João Fadiá recently said that the economic impact caused by the coronavirus pandemic in the country will be “very negative” because it has strongly affected the cashew nut marketing campaign.

“Trade has been operating within a very narrow geographic limit. Markets have been closed. Transportation and movement of people between regions have been suspended. International trade (import and export) was greatly reduced. In addition, the most serious reduction happened in the cashew nut sector, the country’s main export product,” João Fadiá said in an interview with Lusa.

Find out more details about the effects of the coronavirus pandemic on Guinea-Bissau’s economy and read the latest economic news in the world, with the Born2Invest mobile app.

IMF downgraded the Guinea Bissau’s GDP growth for 2020

“All this explains the downward revision of our GDP growth projections for 2020, but in fact nobody knows yet, with any accuracy, the effects that this situation will effectively have on the economy,” the Finance Minister said.

With economic growth forecasts of 4.5% of Gross Domestic Product for 2020, before the pandemic began, the International Monetary Fund now predicts a contraction of -1.9% for Guinea-Bissau.

In relation to the marketing of cashew nuts, the minister explained that in addition to the measures to halt the new coronavirus pandemic, delays at government level and a decrease in international demand also contributed to a weak campaign.

“The late announcement by the Government of the reference price to the producer, as well as the conditions of export (costs to be borne by exporters), meant that the price charged to the producer was very low in relation to the expectations created before the pandemic,” said João Fadiá.

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The price of the kilogram of cashew nuts bought from the producer was $0.43 (250 cfa), about 0.38 euro cents compared to $0.87 (500 cfa), about 0.76 euro cents in 2019.

“The low demand on the international market for crude chestnuts (India and Vietnam) continues to constrain national operators to buy the chestnuts still available from producers,” said the minister.

That situation occurs throughout the sub-region, which still has important stocks to export.

“Finally, the arrival of the rainy season, makes it very difficult to evacuate the product to Bissau, in addition to contributing to its low quality, given the degree of humidity in this period,” he stressed.

More than 80% of the Guinean population depends directly or indirectly on the marketing campaign for cashew nuts, which also represents a contribution of 11% to state revenue and 90% of the country’s total exports.

“This situation has and will have a very negative impact on the economic life and people of Guinea-Bissau in 2020,” he said.

To revive the economy, the Guinean government recently presented an emergency development program, budgeted at around $300 million (€263 million), which needs assistance from international partners.

“We believe that this program is absolutely necessary to reverse the current negative trend of economic activity. But more than responding to the conjunctural effects of the COVID-19 health crisis, this program has a reformist stamp and intends to carry out a set of reforms in the economy, for a reorientation based on formalization and with a stronger business fabric, capable of contributing to increase our productivity and make our economy stronger and more competitive,” explained the minister.

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(Featured image by Valeria Rodrigues via Pixabay)

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First published in Africa 21 Digital, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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Michael Jermaine Cards is a business executive and a financial journalist, with a focus on IT, innovation and transportation, as well as crypto and AI. He writes about robotics, automation, deep learning, multimodal transit, among others. He updates his readers on the latest market developments, tech and CBD stocks, and even the commodities industry. He does management consulting parallel to his writing, and has been based in Singapore for the past 15 years.